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☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Exact name of registrant as specified in its charter)

(608) 535-8815 (Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value per share

EXAS

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer			☒			Accelerated filer			☐
Non-accelerated filer			☐			Smaller reporting company			☐
Emerging growth company			☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 31, 2023, the registrant had 180,849,944 shares of common stock outstanding.

Part I — Financial Information

Exact Sciences Corporation (together with its subsidiaries, “Exact,” or the “Company”) was incorporated in February 1995. Exact is a leading global cancer diagnostics company. It has developed some of the most impactful tests in cancer screening and diagnostics, including Cologuard® and Oncotype DX®. Exact is currently working on the development of additional tests, with the goal of bringing new, innovative cancer tests to patients throughout the world.

The accompanying condensed consolidated financial statements, which include the accounts of the Company and those of its wholly owned subsidiaries and variable interest entities, are unaudited and have been prepared on a basis substantially consistent with the Company’s audited financial statements and notes as of and for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K (the “2022 Form 10-K”). All intercompany transactions and balances have been eliminated upon consolidation. These condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted (“GAAP”) in the United States of America (“U.S.”) and follow the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of adjustments of a normal and recurring nature) considered necessary for a fair statement of its financial position, operating results and cash flows for the periods presented. The condensed consolidated balance sheet at December 31, 2022 has been derived from audited financial statements, but does not contain all of the footnote disclosures from the 2022 Form 10-K. The results of the Company’s operations for any interim period are not necessarily indicative of the results of the Company’s operations for any other interim period or for a full fiscal year. The statements should be read in conjunction with the audited financial statements and related notes included in the 2022 Form 10-K.

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Critical accounting policies are those that affect the Company’s financial statements materially and involve difficult, subjective or complex judgments by management, and actual results could differ from those estimates. These estimates include revenue recognition, valuation of intangible assets and goodwill, valuation of contingent consideration, and accounting for income taxes among others. The Company’s critical accounting policies and estimates are explained further in the notes to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q and the 2022 Form 10-K.

During the nine months ended September 30, 2023, there were no changes to the Company’s significant accounting policies as described in the Company’s 2022 Form 10-K, except as described in the Contingent Consideration Asset and Recently Adopted Accounting Pronouncements sections below.

The sale of the Company’s intellectual property and know-how related to the Company’s Oncotype DX Genomic Prostate Score test (“GPS test”) resulted in the recognition of variable consideration in accordance with Accounting Standards Codification (“ASC”) 606. The Company estimates the amount of variable consideration that it is entitled to each quarter using the most likely amount method and considers whether there are any constraints on the consideration. If it is probable that a significant reversal of a gain would not occur, the Company will record a gain. To determine the classification of the consideration, the Company determines if the consideration is conditional on something other than the passage of time. Revenue-based contingent consideration that is conditional on something other than the passage of time, including future revenues from sales related to the GPS test, result in the variable consideration being classified as a contract asset. At the time the amount earned is determined, and passage of time is the only condition remaining, the contract asset is reclassified to a receivable.

In July 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2023-03, Presentation of Financial Statement (Topic 205 ), Income Statement - Reporting Comprehensive Income (Topic 220 ), Distinguishing Liabilities from Equity (Topic 480 ), Equity (Topic 505 ), and Compensation - Stock Compensation (Topic 718 ), to amend various SEC paragraphs in the ASC to reflect the issuance of SEC Staff Accounting Bulletin No. 120, among other things. The Company adopted this conforming guidance upon issuance, and the adoption had no material impact to the Company's consolidated financial statements.

Basic net income (loss) per common share (“EPS”) was determined by dividing net income (loss) applicable to common stockholders by the weighted average common shares outstanding during the period. Diluted EPS is based on shares that are outstanding per the calculation of basic EPS and on potentially dilutive shares.

The following is a reconciliation of the numerator and denominator used to calculate basic EPS and diluted EPS for the periods indicated:

The following potentially issuable common shares were not included in the computation of diluted net loss per share because they would have an anti-dilutive effect:

The Company’s revenue is primarily generated by its laboratory testing services utilizing its Cologuard and Oncotype® tests. The services are considered completed upon release of a patient’s test result to the ordering healthcare provider.

The following table presents the Company’s revenues disaggregated by revenue source:

Screening revenue primarily includes laboratory service revenue from Cologuard and Prevention Genetics, LLC (“PreventionGenetics”) tests while Precision Oncology revenue includes laboratory service revenue from global Oncotype DX and therapy selection tests.

At each reporting period end, the Company conducts an analysis of the estimates used to calculate the transaction price to determine whether any new information available impacts those estimates made in prior reporting periods. The Company recognized revenue from a change in transaction price of $4.7 million and $6.4 million for the three months ended September 30, 2023 and 2022, respectively. The Company recognized revenue from a change in transaction price of $23.7 million and $17.6 million for the nine months ended September 30, 2023 and 2022, respectively.

The Company’s deferred revenue, which is reported in other current liabilities in the Company’s condensed consolidated balance sheets, was not material as of September 30, 2023 and December 31, 2022.

Revenue recognized for the three and nine months ended September 30, 2023 and 2022 that was included in the deferred revenue balance at the beginning of the period was not material.

The following table sets forth the Company’s cash, cash equivalents, and marketable securities at September 30, 2023 and December 31, 2022:

Available-for-sale debt securities, including the classification within the condensed consolidated balance sheet at September 30, 2023, consisted of the following:

______________

(1)There was no tax impact from the gains and losses in accumulated other comprehensive income (loss) (“AOCI”).

Available-for-sale debt securities, including the classification within the condensed consolidated balance sheet at December 31, 2022, consisted of the following:

______________

(1)There was no tax impact from the gains and losses in AOCI.

The following table summarizes contractual underlying maturities of the Company’s available-for-sale debt securities at September 30, 2023:

The following table summarizes the gross unrealized losses and fair values of available-for-sale debt securities in an unrealized loss position as of September 30, 2023 aggregated by investment category and length of time those individual securities have been in a continuous unrealized loss position:

The Company evaluates investments that are in an unrealized loss position for impairment as a result of credit loss. It was determined that no credit losses exist as of September 30, 2023 and December 31, 2022 because the change in market value for those securities in an unrealized loss position resulted from fluctuating interest rates rather than a deterioration of the credit worthiness of the issuers.

The gains and losses recorded on available-for-sale debt securities and equity securities are included in investment income (loss), net in the Company’s condensed consolidated statements of operations. The gains and losses recorded were not material for the three and nine months ended September 30, 2023 and 2022.

Inventory consisted of the following:

The carrying value and estimated useful lives of property, plant and equipment are as follows:

______________

(1)Lesser of remaining lease term, building life, or estimated useful life.

Depreciation expense for the three months ended September 30, 2023 and 2022 was $29.3 million and $25.0 million, respectively. Depreciation expense for the nine months ended September 30, 2023 and 2022 was $83.6 million and $73.5 million, respectively.

At September 30, 2023, the Company had $96.8 million of assets under construction, which consisted of $61.9 million in machinery and equipment, $20.5 million in capitalized costs related to software projects, $8.3 million in leasehold and building improvements, and $6.1 million related to buildings. Depreciation will begin on these assets once they are placed into service upon completion.

The following table summarizes the net-book-value and estimated remaining life of the Company’s intangible assets as of September 30, 2023:

The following table summarizes the net-book-value and estimated remaining life of the Company’s intangible assets as of December 31, 2022: